Amazon on fire

23rd April 2012

A new play for Amazon – content rights acquisitions

ONLINE retailer Amazon took a significant step beyond selling books into publishing them last week, with the acquisition of the North American rights to publish Ian Fleming's James Bond thrillers in both print and digital form.

Just as the internet giant has hit high street booksellers and even libraries hard, as previously reported on Mindful Money, so industry insiders fear the move into publishing could force out traditional publishing houses.

Dominating the e-book space

By publishing its own books, Amazon can offer exclusive content and thus bolster its position as the dominant eBook supplier. Via the Kindle, Amazon is already estimated to account for around 70% of the ebook market, but competitors including Apple's iPad are snapping at its heels.

Amazon's foray into publishing includes the launch of two imprints last year, Thomas & Mercer, to focus on mysteries and fiction, and Montlake Romance. It then hired publishing supremo Larry Kirshbaum, former chief executive of Time Warner Publishing Group, to found new imprints, with a "focus on acquiring high quality books in literary and commercial fiction, business and general non-fiction", according to The Bookseller.

The fight-back against Amazon begins in earnest

Attempts by the established publishing houses to fight back against Amazon's ebook supremacy have already come under fire. Last week the US Department of Justice sued Apple and five major publishers for price fixing ebooks. Simon & Schuster, Hachette and Harper Collins have all agreed to settle, but Penguin, part of Pearson Plc, Macmillan and Apple are fighting the case through the courts.

As stated in the complaint by the Department of Justice, one publisher's CEO was alleged to say: "Our goal is to force Amazon to return to acceptable sales prices."

The European Commission is also probing Apple and publishers in a similar antitrust probe, as reported by Reuters.

Where investors need to be mindful

Investors will also need to review the implications of Amazon's ebook ambitions, in relation to any shares held in traditional publishers. The major publishing houses face a losing battle in trying to shore up their prices, according to commentators including the blogosphere.

David Pakman, who blogs about the undoing of traditional media, examined the ebook pricing strategy of traditional publishers versus Amazon, and concluded:

Meanwhile the rise of the ebook could provide opportunities for bloggers and other authors willing to self-publish. Writers selling ebooks on Kindle can earn significantly higher royalties than the 8% to 15% a traditional publisher might offer on a paper copy. Coverage of last week's London Book Fair cited rates around 35% for an ebook sold at 99p, and 70% for ebooks priced above £1.59 on Kindle.

One of the most successful examples is Amanda Hocking, a writer of paranormal fiction rejected by multiple traditional publishers. Two years ago, Amanda decided to self-publish one of her novels as a digital book on Amazon – and has subsequently sold more than 1.5 million copies and made more than $2.5 million, all while side-stepping the entrenched publishers.

Potentially, bloggers with an extensive readership could prove an exciting opportunity for digital publishers, just as the major music companies increasingly seek out unsigned bands that have developed a fanbase online.

What does this mean for bloggers in the finance space?

Some of the best known financial bloggers on the web have already created digital books, and Doug Rice has put together a review of the 12 most compelling ebooks business bloggers publish for free.

By selling ebooks, bloggers could potentially monetise their output, and earn higher revenue than the limited potential from online advertising.

Alex Frey, author of an ebook on investing, claims on the Huffington Post that his "Beginner's Guide to Investing" now regularly gets more downloads than books by financial titans Warren Buffet and George Soros. Keeping the length down to 50 pages, and selling for a low price, have helped fuel his success.

A take-out for publishers?

With both authors and book buyers skipping straight to digital formats, the traditional book publishers may yet be forced to reform or die, while Amazon lives on to see another day.